Facts of the Case

The petitioner, Tvl. VARS Enterprises, represented by its partner A. Ramanathan, approached the Madurai Bench of the Madras High Court under Article 226 of the Constitution of India.

The petitioner challenged the order dated 28.12.2023 relating to Tax Period 2017-18 and sought issuance of a Writ of Certiorari to call for the relevant records and quash the order as illegal and in gross violation of the principles of natural justice.

The impugned assessment order was passed under Section 73 of the TNGST Act, 2017.

The assessment was completed ex parte because the petitioner did not utilise the opportunities provided during the assessment proceedings.

The specific discrepancy recorded in the judgment was:

Input mismatch (GSTR-3B vs GSTR-2A).

The petitioner’s merits explanation was that:

  • there was no excess claim of ITC under Section 16 of the Act;
  • the petitioner was ready to file a reply with connected records in accordance with Circular No. 183/15/2022 dated 27.12.2022; and
  • according to the petitioner, once the requirements of the circular were complied with, there would be no liability under the GST Act.

The petitioner’s explanation for non-participation was that:

  • the impugned order had been uploaded on the GST Portal without its knowledge; and
  • the accountant had not informed the petitioner about the impugned order.

These matters are specifically captured in the three-column table on page 3 of the judgment, which separately records the discrepancy, the assessee’s merits explanation and the reason for not availing the opportunity.

Issues Involved

The principal issues involved were:

  1. Whether the ex parte assessment order dated 28.12.2023 passed under Section 73 of the TNGST Act, 2017 could be sustained without considering the petitioner’s proposed explanation and supporting records.
  2. Whether there was an actual excess claim of ITC arising from the GSTR-3B vs GSTR-2A mismatch.
  3. Whether the petitioner’s claim of no excess ITC under Section 16 required fresh verification by the assessing authority.
  4. Whether the petitioner was entitled to place a reply and connected records before the authority in terms of Circular No. 183/15/2022 dated 27.12.2022.
  5. Whether compliance with the circular would affect the alleged GST liability arising from the mismatch.
  6. Whether the petitioner’s explanation that it lacked knowledge of the GST Portal-uploaded order and that its accountant had failed to inform it justified another opportunity.
  7. Whether equitable relief should be made conditional upon deposit of 25% of the disputed tax amount.
  8. Whether any bank account attachment made pursuant to the impugned assessment order should continue after the order was set aside.

Petitioner’s Arguments

The petitioner disputed the allegation of excess ITC.

Its principal contention was that:

There was no excess claim of ITC under Section 16 of the Act.

The petitioner stated that it was prepared to:

  • file a detailed reply;
  • submit connected records; and
  • comply with the requirements contemplated under Circular No. 183/15/2022 dated 27.12.2022.

The petitioner further contended that once the requirements of the circular were complied with, no liability would arise under the GST Act.

Thus, the petitioner’s case was that the GSTR-3B vs GSTR-2A mismatch required factual reconciliation and examination of supporting documents rather than continuation of the ex parte determination.

Regarding non-participation, the petitioner explained that:

  • the impugned order was uploaded on the GST Portal without its knowledge; and
  • the accountant did not inform the petitioner about the impugned order.

The petitioner therefore sought another opportunity to place its explanation and documentary material before the assessing officer. These contentions are expressly reflected in the table on page 3 of the judgment.

Respondent’s Arguments

The respondent was represented by the learned Government Standing Counsel.

The judgment records that the High Court heard:

  • learned counsel for the petitioner; and
  • learned Government Standing Counsel for the respondent.

However, the six-page order does not separately reproduce any detailed independent counter-submissions by the respondent concerning:

  • the alleged GSTR-3B vs GSTR-2A mismatch;
  • the petitioner’s assertion of no excess ITC;
  • the applicability or satisfaction of Circular No. 183/15/2022;
  • the supporting documents proposed to be filed; or
  • the petitioner’s explanation concerning the accountant.

Therefore, to preserve the meaning of the judgment, no additional departmental contention should be attributed to the respondent beyond what is expressly recorded.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancy;
  • the explanation provided by the assessee; and
  • the reason given before the Court for not availing the earlier opportunity.

The Court held that an opportunity could be granted to the assessee to:

  • present its submissions; and
  • produce relevant supporting documents before the respondent assessing officer.

The Court observed that it had been extending such opportunities on equitable grounds, though under appropriate conditions.

Accordingly, the Court granted a fresh opportunity to the petitioner subject to the condition of depositing 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  • within four weeks from receipt of a web copy of the order, the petitioner shall deposit 25% of the disputed tax amount with the respondent;
  • the petitioner need not wait for a certified copy of the order;
  • upon such deposit, the impugned order dated 28.12.2023 shall stand set aside;
  • the matter shall stand remanded back to the respondent;
  • the assessee shall appear before the respondent without fail;
  • the assessee shall submit its reply and documents in support of its claim;
  • the respondent shall consider the matter afresh and pass orders in accordance with law;
  • because the impugned assessment order is set aside, any attachment of the bank account made pursuant to that order shall stand raised;
  • no costs were awarded; and
  • the connected miscellaneous petition was closed.

The 25% deposit condition appears on page 3, while the detailed operative directions are recorded on page 4 of the judgment.

Important Clarification

This judgment does not finally hold that the petitioner had no excess ITC claim.

It also does not conclusively determine that:

  • every GSTR-3B vs GSTR-2A mismatch is legally irrelevant;
  • Circular No. 183/15/2022 automatically removes all tax liability;
  • the petitioner has already fulfilled every requirement of the circular; or
  • the entire disputed ITC is necessarily admissible.

The statement that there was no excess claim of ITC under Section 16 was the petitioner’s explanation on merits, as recorded by the Court.

Similarly, the contention that compliance with Circular No. 183/15/2022 would result in no liability was also part of the assessee’s case.

The High Court did not finally adjudicate those contentions. Instead, it:

  • granted a fresh opportunity;
  • permitted the petitioner to file its reply and documents;
  • required the authority to reconsider the matter afresh in accordance with law; and
  • imposed a 25% disputed-tax deposit condition.

Therefore, the ruling is a conditional remand for fresh adjudication, not a final declaration of ITC eligibility.

A further important clarification is that the Court did not expressly hold that mere non-communication by an accountant invalidates an assessment order. It considered the petitioner’s explanation along with the nature of the discrepancy and granted equitable relief under appropriate conditions.

Sections Involved

Section 73 of the TNGST Act, 2017:
The impugned assessment order dated 28.12.2023 was expressly passed under this provision.

Section 16 of the GST Act – Input Tax Credit:
The petitioner specifically contended that there was no excess claim of ITC under this provision.

Article 226 of the Constitution of India:
The petitioner invoked the writ jurisdiction of the High Court seeking a Writ of Certiorari.

Circular No. 183/15/2022 dated 27.12.2022:
The petitioner expressly relied upon this circular and stated that it was ready to file its reply and connected records in accordance with it.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783060079_363compressed.pdf 

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